Transportation is the key challenge in Nogales this year

by Tad Thompson | February 09, 2018

RIO RICO, AZ — A year ago it was low produce prices, but this winter truck transportation is headlining conversation in the Nogales community.

If misery were to love company, clearly Nogales isn’t alone in dealing with a lack of truckers to haul perishable fresh fruits and vegetables. But, however widespread the pain may be, it hurts in Nogales.

“We’ve never seen those kinds of prices,” said Chris Ciruli, a partner in Ciruli Bros. LLC in Rio Rico, AZ.

Jerry Havel, director of sales and marketing for Fresh Farms LLC in Rio Rico, indicated that new transportation prices “will find their level. No one knows where it will settle.” But he said the new electronic logging device regulations “are costing an extra day” when shipping from Nogales to New York. “Instead of four, it’s taking five days. When going to Montreal it’s taking six, not five. That is a problem. We have to change our loading hours. We do all we can on our side not to burn the drivers’ time waiting.”

While efforts to improve the problem are under way, truck rates will inevitably rise because of new ELD inefficiencies.

Havel indicated that transportation within Mexico “is not a problem. It is just outbound” from Nogales that is feeling the great increase in rates.

Nogales produce distributor Omar Losolla noted that there is a 90-day grace period on the new rule commanding that truckers use ELDs. This grace period is to expire March 18.

The ELD law went into effect on Dec. 18, which led to increased truck prices. “It’s only been a month,” Losolla told The Produce News. “But it seems like forever.” Losolla is vice president of sales and marketing for Rio Rico’s GreenPoint Distributing LLC.

Losolla said some truckers were taking advantage of the grace period — especially around the Christmas and new year period — and price gouging around the logging devices even if that technology was not yet installed in their truck. Around New Year’s, truck prices to New York from Nogales reached as high as $10,000 to $11,000 per load, Losolla said. Within two weeks that number fell to $7,500 to $8,500.

Ciruli noted that Christmastime freight costs were equaling product values within a trailer.

As a result, Ciruli said, “people are looking at every option, including rail and pigs.” There is piggyback trailer service out of Phoenix and the port of Tucson offers four-day intermodal service to Chicago. Given ground transportation, that is a net-seven-day service, plus rail service to another city, such as Baltimore or Philadelphia.

Ciruli said a downside of railcar shipping is that there aren’t many customers — outside of terminal market operators — who can handle carload volumes.

Losolla said he feels badly for the trucking companies to be forced to deal with the ELD laws. At the same time, “it’s not the consumers’ fault” that they will ultimately be forced to pay for the high freight rates. But, at least in the short run, in mid-January, prices were “getting back down to normal.”

In mid-January, Losolla hoped that, because of the perishability issue, the ELD law might be waived for perishable produce. He noted that live animal shippers are exempt from ELD laws.

Mervin Sexton, a co-owner of the livestock auction Manhattan Commission Co. in Manhattan, KS, confirmed Feb. 5 that long-haul livestock haulers were so-far exempt from ELD laws. He wasn’t sure if truckers would ever face ELDs for hauling live animals.

(Provided this livestock insight, Chris Ciruli lightly derived a spontaneous plan to “start loading a goat on the back of our trailers” that otherwise haul produce.)

Ciruli said the January truck shortage was daunting because “we are not at the peak weeks for McAllen or Nogales. That is scary.” He added that February and March mark the Mexican produce export volume peak.

Edgar Duarte, a partner in Higueral Produce Inc., noted that truck rates to Los Angeles from Nogales shot from $1,400 at Thanksgiving to as much as $3,000 at Christmas. In Los Angeles, Higueral was competing with Mexican shippers who enter through Tijuana, and who weren’t facing the same rates in reaching destination. “We are eating the differences in freight. We usually make up the difference in freight, but when you compete with Tijuana, the margins are really, really low.”